Perhaps this is obvious, but The Mac Mini is not best seen as a cheap PC - it's best seen as an expensive digital consumer hub for the living room. In fact, what we're gonna see over the next couple of years, imho, is the (real) epic battle for the living room, in almost comical contrast - MS, using a classic top down strategy, and Apple, using a classic bottom up strategy.

Apple's emergent strategy is likely to be the same as it was with the iPod - not move primarily upmarket, but instead determine market value drivers and strip the offering down to it's bare essentials, growing the market. This strategy leverages the exponentially falling costs of digital media components (memory, connectivity, app-specific processors, etc), as well as lets Apple ride the adoption curve intelligently, by using early upmarket offerings to discover what the mass market really wants. Think about the iPod in 2001 versus the iPod family now.

It's a smart move - not because it will convince Windows users to switch - but because it (finally) begins to position the Mac as a complement to Wintel. At the same time, let's note the most important differentiator - it's the antiMS digital hub. MS's offering is a total solution - expensive, and packed with features (and restrictions). In fact, as most of us know, MS is unsurprisingly trying to build an entire ecosystem.

Apple's approach, I think, will be the opposite - to unbundle the essential components of the digital hub, and then rebundle them in the next year or two according to component price falls, emerging consumer preferences, and emerging digital media dominant designs. I think this approach is more flexible, cheaper, and better aligned to a turbulent market whose structures haven't shaken out yet. That's because it becomes exponentially more costly to engineer standards as the architectural complexity of a design grows - here's a nice example:

"...According to anti-virus vendor Panda Software, two new Trojan horses -- dubbed WmvDownloader.a and WmvDownloader.b -- have been planted in video files seeded to peer-to-peer file-sharing networks like eMule and KaZaA. The Trojans take advantage of the new anti-piracy features in Windows Media Player 10 and Windows XP SP2 to trick users, said Panda."

So these are two ends of the digital media strategy spectrum. And what limited history there is in this market (iPod) shows that Apple's deconstruction and leverage (ie, bottom up) strategy works better than MS's total solution (ie, top down) strategy.